Greg Hinz On Politics

Quinn, Rauner battle for control of Illinois Lottery

A political war is breaking out between the state's incumbent and incoming chief executives over who should manage and supply the Illinois Lottery.

In a series of developments yesterday evening, the administration of outgoing Gov. Pat Quinn announced that it has finalized a pact under which the Lottery's private manager, Northstar Lottery Group, would be terminated. But Gov.-elect Bruce Rauner's camp immediately blasted the pact as "a bad deal" that ties the new governor's hands and "will cost taxpayers tens of millions of dollars" over the next four years.

The free-for-all started when Lottery Director Michael Jones said that a negotiated divorce has been reached giving Northstar and its partners some financial concessions. The state immediately will seek bids for a new private operator, but that will take "at least some months," Jones said.

A final separation deal had been expected since August, when Gov. Pat Quinn said he had directed aides to dissolve the often bumpy arrangement under which the state owns the Lottery but Northstar operates it under Jones' direction.

The separation deal calls for both parties to end any litigation, which could have been quite expensive, and for Northstar to receive up to $12.7 million in out-of-pocket costs that it was guaranteed under its current deal.

More significant financially, Northstar's main partners, GTech and Scientific Games, will continue to provide technical support to the lottery through a transition period, though at a lower rate, Jones said.

'ANOTHER 11TH-HOUR DEAL''

Jones said the interim compensation deal is 12.9 percent below previous levels and will save the state nearly $10 million a year.

But the suggestion that the deal is advantageous to the state was immediately ripped by the incoming governor.

In a statement, Rauner spokesman Mike Schrimpf said the "compromise" actually guarantees that GTech and Scientific will draw a state check until 2018—even if a new private operator wants to bring in other firms.

"Despite our repeated requests, the Quinn Administration has executed another 11th-hour deal," Schrimpf said. "We were not consulted or even informed. This is a bad deal that creates a new binding contract that will cost taxpayers tens of millions of dollars."

Reached later, Jones stood by the deal as good for the state and said any concerns about it are a “complete miscomprehension.”

But he conceded a key factual point. Jones said it is true that under terms of the separation agreement Gtech and Scientific will be technical vendors to the Lottery at least until June, 2018. But they would have worked until 2021 under the now-canceled contract with Northstar, he said. Nationwide, the two companies have almost no competition for the business, he added.

Locking in their contracts will be a benefit to the new private manager, he added, allowing it to “focus on developing better games” rather than technical matters, he said.

Northstar's spokeswoman did not respond to a request for comment. Rauner has not detailed what he'd like to do with the lottery.

In October, after Quinn announced his intention to terminate the deal, Scientific Games took a $19.7 million writeoff on its investment in the joint venture.